Warner Music's Shazam Deal: What It Means For Music

Warner Music Group's announcement this week that it has entered into a strategic collaboration with Shazam is the latest example of traditional music labels embracing social data to reinvent the way they do business.

The deal lets Warner access Shazam's proprietary music data, which includes information for each time its 420 million users trigger its app to identify a song. That could include the time of day, the song being identified and, if users enable location tracking, the place where the song was tagged.

Warner would use the data to help find promising, unsigned artists. With intense competition to find the next Lady Gaga or Katy Perry, labels look anywhere they can to find an edge. Today, data has become the latest tool for artist discovery, and companies like Shazam, The Echo Nest, Gracenote and Next Big Sound are finding themselves in a position to deliver that information. Lyor Cohen's 300 Entertainment, for example, recently signed a deal to access Twitter data for a similar purpose.

What's unusual about Warner's arrangement is that it is also developing a Shazam-branded label. The deal calls for Shazam and Warner to split the revenue from music released by artists discovered through Shazam and signed to the label. The terms of the split were not disclosed.

"By partnering with Shazam, a brand synonymous with music discovery for fans, we have forged a potent proposition -- the first crowd-sourced, big data record label,” Warner chief operating officer Rob Wiesenthal said.

Shazam, which was founded as a mobile app that can identify songs quickly developed into a data and research company that has expanded its technical capabilities to also recognize television shows and movies. Its app is used to identify about 500 million pieces of content a month, or roughly 16 million a day. The British technology company has a reference database of more than 35 million songs and is adding about 1 million new tracks a month. In addition, Shazam has employed a team of several dozen people who scour music venues throughout the world to capture new and local music in an effort to make its database as comprehensive as possible.

Warner and Shazam have already worked together in the past to use the app as a promotion and marketing tool, for example, in getting the word out about Chromeo's "Come Alive" video, which premiered Jan. 30.